Nuts and bolt-ons

In a market characterised by a broad range of growth strategies, Royal & Sun Alliance’s outlook is as clear cut as they come.

Profitable growth, and bolt-on acquisitions.

Though the message is nothing new, in the wake of its latest acquisition it could quite easily be concluded that some sort of strategic shift – or at the very least the upping of a gear – has begun.

This point of view is lent credence by two factors: First, the insurer has said it will be making further buys this year, which is significant considering there was a lull of 14 months between the Fyfe Group and the insurer's previous acquisition, Martello; second, its pockets are virtually limitless – at least compared to some of the other players who must refinance in order sate their broker appetites.

“In the wake of its latest acquisition it could quite easily be concluded that some sort of strategic shift, or at the very least the upping of a gear, has taken place.

R&SA, however, is quick to point out that the only things being ramped up in the immediate future will be the vehicles of its motor trade business.

Though the list of points on the R&SA shopping list is almost the same as you would find on any acquisitor’s shopping list – namely profit, fit and price – it is far more selective than most, and is categorical in its unwillingness to budge on price. In the current climate, with brokers holding out for the best offers they can get, this will limit its opportunities.

“Some of the prices being paid are excessive. We’re not prepared to do that,” says strategic partnerships director, Andrew Burke.

The key differentiator for R&SA is the fact that it does buy brokers in an attempt to control distribution. The reasons, it says are about filling in holes, gaining expertise and taking already high proportion underwriting deals with brokers to their natural conclusions.

“Given that R&SA is not about to open a third front in the Insurer-buying-broker war, the clue to its next buy can be found among its trading units.

In a wider strategic context, despite speculation linking the insurer with brokers in order to buttress them against the clutches of the largest consolidators a la Norwich Union and Allianz, it is understood that the insurer has no intention of doing so – even though the official message is that the organisation will take any steps it can to protect the independence of smaller intermediaries.

There are, after all, many ways to skin a cat.

Given that R&SA is not about to open a third front in the Insurer-buying-broker war, the clue to its next buy, says Burke, can be found among its recently developed trading units.

Sensible, yes, but considering the units cover a range of lines as broad as the aforementioned insurer strategies, who is next on R&SA's hit-list remains anyone's guess.